Mortgage term - easily changed?

[Phateuk]

Hi,

I'm in the process of doing the groundwork before applying for a first mortgage. I'll be looking at ~£250k properties with LTV of 90% and ideally would like to repay asap.

Using some comparison sites; at around 3% I'll be looking at circa £1200/month repayment based on 25 years, however I'd like to be paying around £1600/month. Most of the mortgages I've seen restrict to 10% overpayment which on £1200 is still a little low. My goal is to reduce the LTV within the initial fixed 2 years enough to open up some better rates (seems to be 70% LTV?) and also limit my exposure should rates rise in the future.

My question is, if I were to initially have a 20 year term, then the interest rates shot up, would I easily be able to extend the term to reduce the mandatory monthly payment if on a fixed rate deal? By "easily" I'm thinking no-fees and a quick phonecall, or via online banking application.

Thanks in advance

[coetzeeh]

why not stick to the 25 year term and overpay the £400 every month?

[scottri]

I believe the 10% over payment is against the whole mortgage amount over a year. So £25k a year max over payment using your figures.

Personally I have gone for a longer term to keep my payments as low as possible (in case of redundancy etc) and then overpay as much as I can/want each month.

[Sarnie]

Phateuk said:

Hi,

I'm in the process of doing the groundwork before applying for a first mortgage. I'll be looking at ~£250k properties with LTV of 90% and ideally would like to repay asap.

Using some comparison sites; at around 3% I'll be looking at circa £1200/month repayment based on 25 years, however I'd like to be paying around £1600/month. Most of the mortgages I've seen restrict to 10% overpayment which on £1200 is still a little low. My goal is to reduce the LTV within the initial fixed 2 years enough to open up some better rates (seems to be 70% LTV?) and also limit my exposure should rates rise in the future.

My question is, if I were to initially have a 20 year term, then the interest rates shot up, would I easily be able to extend the term to reduce the mandatory monthly payment if on a fixed rate deal? By "easily" I'm thinking no-fees and a quick phonecall, or via online banking application.

Thanks in advance

You do know that the 10% overpayment is 10% of the balance per year, not 10% of the monthly payment?

10% of a £225k mortgage is £22.5k / 12 = £1875 max over payment per month in addition to the normal monthly payment.........

[Phateuk]

Thanks for the quick responses!

I thought the limit was 10% of the monthly payment (as you can tell)

Looks like I'll be ok with the 25 year term then!

[TheInternet]

Sarnie said:

You do know that the 10% overpayment is 10% of the balance per year, not 10% of the monthly payment?

This is not always the case, as presumably you know. I am looking at a product that permits only 20% of the monthly payment before incurring fees, because of this will also be looking to reduce the term. I have been told it is possible to do but will require another assessment in branch.

[Phateuk]

TheInternet said:

Sarnie said:

You do know that the 10% overpayment is 10% of the balance per year, not 10% of the monthly payment?

This is not always the case, as presumably you know. I am looking at a product that permits only 20% of the monthly payment before incurring fees, because of this will also be looking to reduce the term. I have been told it is possible to do but will require another assessment in branch.

Is this described in detail when you get further into the application? As an example I've been looking at hsbc, and their site states:

hsbcwebsite said:

Overpayments: Up to 20% overpayment can be made as part of your monthly Direct Debit without incurring an Early Repayment Charge.

There's no further detail about per month or per year percentage...

[TheInternet]

Phateuk said:

Is this described in detail when you get further into the application? As an example I've been looking at hsbc, and their site states:

hsbcwebsite said:

Overpayments: Up to 20% overpayment can be made as part of your monthly Direct Debit without incurring an Early Repayment Charge.

There's no further detail about per month or per year percentage...

All the fixed rate ones I've looked at here: https://www.hsbc.co.uk/1/2/mortgages/mortgage-rate... state:

hsbcwebsite said:

Overpayments: You can overpay up to 20% of your standard monthly payment without incurring an Early Repayment Charge.

Other mortgages they offer may have defferent terms but I'd be sure to find out what they are.

[Qwert1e]

They can't stop you paying off some mortgage any time you like - unless you've entered some sort of collateral contract like a fixed rate period. They can prevent you fiddling about with tiny amounts though.

IMO fixed rate period is a waste of time in any event. It's probably a 2 year fix on a 25 year mortgage, which is frankly pointless.

Just take a normal 25 year repayment mortgage and make additional payments when you want to. You can simply save up for a few months and then make a capital repayment if you want to, without changing your monthly amount.